Monthly Archives: May 2013

Where’s leadership when you need it?

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I’ve started to read properly Benn Steil’s [amazon_link id=”0691149097″ target=”_blank” ]The Battle of Bretton Woods[/amazon_link], which has been sitting tantalisingly on the book pile for a few weeks, and I’d only paged through when laid low by a cold. I like this quote from President Roosevelt, early in the book – it’s his message to the opening of the Bretton Woods conference:

“Economic diseases are highly communicable. It follows, therefore, that the economic health of every country is a proper matter of concern to all its neighbours, near and distant. Only through a dynamic and soundly expanding world economy can the living standards of individual nations be advanced to levels which will permit a full realization of our hopes for the future.”

How apt for our own times, as well as 1944. I spent a couple of days this week at the OECD’s annual forum and was mulling over the OECD’s origins in US Marshall Aid and post-war rebuilding. Just over 50 years old, it is a low-key place but is an important part of the framework of international economic governance, dealing with gritty but important stuff like tax co-ordination and financial compliance. There has also been a lot of wider thought there about what kind of global economy we might be able to build for the future, including engagement with the wider public, with its Better Life work, for example.

However, technocrats can only go so far without political impetus. The major surplus countries of our day, Germany and China, unfortunately show no signs of the vision that might encourage them to acts of global leadership.

[amazon_image id=”0691149097″ link=”true” target=”_blank” size=”medium” ]The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order (Council on Foreign Relations Books (Princeton University Press))[/amazon_image]

Money, money, money

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The Liberty Reserve story is fascinating. E-money guru Dave Birch (at 45:00) has been doing wonders explaining it. There’s been so much written about Bitcoin that I’ve only just realised that Liberty Reserve and several other competitor electronic money sites existed. It might be difficult for the authorities to distinguish between criminal and socially-useful innovation in e-money, although presumably the ability to verify identity is going to be key. Even so, electronic local currencies will no doubt arouse the interest of Her Majesty’s Revenue and Customs in case of tax minimisation activity. There’s surprisingly little sign of policy interest in electronic currencies, however. The only recent paper I’ve spotted is the ECB’s Virtual Currency Schemes (pdf) of October last year.

My top books about money that get to the philosophical issues are David Wolman’s [amazon_link id=”0306818833″ target=”_blank” ]The End of Money[/amazon_link], Keith Hart’s [amazon_link id=”1861972083″ target=”_blank” ]The Memory Bank[/amazon_link], Edward Castranova’s [amazon_link id=”0226096262″ target=”_blank” ]Synthetic Worlds[/amazon_link] and [amazon_link id=”0226893952″ target=”_blank” ]Boggs[/amazon_link] by Lawrence Weschler. The latter three are some years old now. I’m delighted to say, though, that Dave Birch is even now – quill pen in hand – writing on the subject of money and identity.

[amazon_image id=”0306818833″ link=”true” target=”_blank” size=”medium” ]End of Money[/amazon_image]

[amazon_image id=”0226893952″ link=”true” target=”_blank” size=”medium” ]Boggs: A Comedy of Values (Passions and Wonders Series)[/amazon_image]

Reforming economics

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An update on the process of reforming the undergraduate economics curriculum.

The story so far is that in February 2012 a conference on the subject of whether the curriculum at this level is appropriate in the light of the financial crisis, and of employers’ skill needs, was hosted by the Bank of England and Government Economic Service. The pre-and post-conference papers are collected in [amazon_link id=”1907994041″ target=”_blank” ]What’s The Use of Economics: Teaching the Dismal Science After the Crisis.[/amazon_link]

[amazon_image id=”1907994041″ link=”true” target=”_blank” size=”medium” ]What’s the Use of Economics?: Teaching the Dismal Science After the Crisis[/amazon_image]

A working group of academics and employers picked up the reins in a working group which drew up the statement published in the latest Royal Economic Society newsletter. There was real consensus about this, and some of the working group’s members are taking forward the conclusions in a discussion about subject benchmarks with the Quality Assurance Agency, which reviews the performance of higher education institutions.

In parallel, Wendy Carlin of UCL is starting work on developing a new curriculum and supporting teaching materials, to be freely available. The first stage of her work is being supported by INET. Her aim is to have a curriculum to pilot from the autumn of 2014.

This is progress beyond our wildest dreams when I first started to contact people about the conference 18 months ago. I think the profession is really quite divided: there are many economists who don’t believe there’s all that much that needs to change. But it’s obvious that enough do now feel the need for intellectual reform that a real shift is under way.

The paradox of trust

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I’m off early this morning to the OECD Forum – on Jobs, Equality, Trust – in Paris, taking part in two sessions. The organisers picked up on the themes of my book [amazon_link id=”0691156298″ target=”_blank” ]The Economics of Enough[/amazon_link], especially the section on trust. I wrote a new essay on trust for the OECD Yearbook, focusing on the paradox that the complex, globalized economy is more dependent on trust than ever, but measures of trust in institutions of various kinds indicate that it’s rather fragile.

[amazon_image id=”0691145180″ link=”true” target=”_blank” size=”medium” ]The Economics of Enough: How to Run the Economy as If the Future Matters[/amazon_image]

It’s going to be interesting to see what the mood of the Forum is, as it gathers policymakers, business people, unions and NGOs, as well as academics – in other words, more workmanlike and less insulated from the world by affluence than Davos. I’ll be tweeting, under the hashtag  #OECDwk as no doubt will other participants @SpeakerLab @slaughteram @tsipirikos @acraiginparis @diane1859 @LaurenceEvans @JArleRH and @yanisvaroufakis

Physics envy?

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There’s a new book causing a stir in the physics community, Lee Smolin’s [amazon_link id=”1846142997″ target=”_blank” ]Time Reborn: From the Crisis in Physics to the Future of the Universe[/amazon_link]. It was reviewed at the weekend by, among others, Gillian Tett in the FT.  She writes: “Smolin, who has worked for several decades at the cutting edge of cosmology, conducting research into areas such as quantum gravity and string theory, argues that it is a mistake to view scientific laws as universal. Rather, they are “path-dependent”, or a function of what occurred before.” As she points out, mid-20th century economics drew on physics, attracted by the scientific rigour of its discoveries. How wonderful it would be to derive precise ‘laws of economics’. Economists are notoriously charged with ‘physics envy’.

[amazon_image id=”1846142997″ link=”true” target=”_blank” size=”medium” ]Time Reborn: From the Crisis of Physics to the Future of the Universe[/amazon_image]

However, it would be physics envy to conclude that economics now needs historical context and path dependency just because a top physicist has written a book discovering the contingency, the historical specificity of events. In her review, Tett concludes: “Economies do not have a “natural balance”; nor do they operate according to timeless “rules”.” But many economists have been there for a while. Some – like the redoubtable Paul Ormerod in books like [amazon_link id=”0571220134″ target=”_blank” ]Why Most Things Fail[/amazon_link] – never stopped arguing that economics is an intrinsically disequilibrium subject, putting dynamic behaviour over time in specific contexts right at centre stage. Older works like Malinvaud’s [amazon_link id=”0470268832″ target=”_blank” ]Theory of Unemployment Reconsidered[/amazon_link], or, famously, Minsky’s  [amazon_link id=”0071592997″ target=”_blank” ]Stablizing an Unstable Economy[/amazon_link]  were disequilibrium theories. Evolutionary economics, albeit always a minority sport, is inherently about dynamics.

I don’t think the concept of equilibrium should be wholly discarded; it can be a useful analytical tool to understand the dynamics of the economy. But on the whole, I don’t think economics needs another phase of physics envy. The subject is already well on the way to rediscovering the importance of time and place.